May 3, 2008

Quico says:Chavez, Ahmadinejad & co. have made something of a hobby horse of it: Oil should be traded in Euros rather than sullied by association with the Grand Imperialist Greenback. But could it be that what they frame as a radical new departure is something markets are already doing on their own?

This chart from The Economist certainly suggests that, holding out the possibility that much of the recent oil boom is a kind of accounting mirage driven by the dollar free-fall. Or alternatively, the rising price of oil could be pushing the dollar down, since a depreciating dollar gives traders an incentive to horde dollar-denominated commodities.

For its part, The Economist blames the Fed, noting that lower US interest rates drive down interest rates world wide, stimulating consumption and fueling the oil boom. Which would be Exhibit Umpteen in the case that the empire unwittingly underwrites the revolution (and the mullahs as well.)

Either way, one suspects the Euro-Oil peg hits Iran harder than it hits Venezuela: they do most of their international trade in Euros, we do ours mostly in dollars. Still, it's worth bearing in mind: the barrels we sell earn more and more dollars, but the dollars we get buy less and less stuff.

May 2, 2008

The slogan is one of the most heartening developments in recent Venezuelan politics: it crystallizes the way the opposition has rediscovered its spine in the wake of its December Referendum victory.

Suddenly, the myriad presidential initiatives that amount to "smuggling constitutional reform through the back door" are meeting far more determined opposition: "no means no" has become a rallying cry for those of us convinced that if democracy it's too mean anything at all, the constitutional reform proposals defeated at the polls must not be resurrected through regular laws.

What a difference a year makes. In spring 2007, I was posting a lot about the distinction between the "hard constitution" (el hilo constitucional) and the "soft constitution": everything else. My argument then was that 95% of the reform proposal was filler, soft constitution stuff that Chávez didn't really need to change the constitution to implement - the evidence being that, in many cases, it was stuff he was already doing.

As I put it at the time at the time, "Supposing the reform proposal were defeated at referendum, do you really think the government would stop regulating pay-TV? Start funding FIEM? Disband the Guardia Territorial? Of course they wouldn't...but in that case, what exactly is the point of asking us to vote on it?" What difference could a vote make?

Every item in that little agenda was already being implemented before the December Referendum, and is still being implemented today. It's not any more unconstitutional today than it was a year ago.

But there is a difference: the referendum made the opposition as a whole much more conscious that the government has no legal basis to do much of what it's doing. December left us with a new awareness of the constitution's role as a bulwark against the abuse of power, and that awareness is becoming a focal point for resistance against further encroachment on our rights.

The government's climb down on the "Bolivarian" School Curriculum is the most visible example, but it goes further than that: the legitimacy of any move to implement Chávez's main agenda - all of which was contained in the reform proposal - has been badly undermined.

We should be clear: the opposition is still much weaker than it once was, hardly unified, still a minority, and only sporadically effective in holding the line against government encroachment. But the ability to say "No es no" has certainly bolstered its legitimacy, at least when it comes to rear-guard actions.

In a way, our referendum win ended up hardening up parts of the "soft constitution", strengthening our allegiance to it, even as the government systematically violates it. It's not much, but I call that progress.

May 1, 2008

Katy says: Recently, I came upon a story about a cost-effective alternative to expensive mass-transit systems. It's called Aerobus and it has been in use in the city of Mannheim, Germany, as well as other places, for many years now.

The system is basically a train made up of several modules that are transported via cables connected by towers 500 meters apart. It is electrical, can reportedly transport up to 40 thousand people per hour and has a construction cost of about $20 million per mile (as opposed to $400 million for conventional subway systems).

I'm no engineer, but it seems that given Caracas' enormous traffic problems, we should be discussing practical, inexpensive solutions such as this one. The only solution can't be for Venezuelans to patiently wait in their colas until the Metro reaches Guarenas or El Hatillo.

by
Juan Cristobal

April 30, 2008

[Note: My usual policy is to steer well clear of non-Venezuelan subjects...we'll be stretching that rule in this post.]

Quico says: There are local elections in Britain tomorrow. By far the highest profile race pits the treacly philochavista Red Ken Livingstone against the inimitable parliamentarian, classicist, columnist, author, magazine editor, television pundit and wit Boris Johnson for mayor of London. You can think of it as Chávez's first electoral test of the year.

Boris - a.k.a that guy who looks like a polar bear who just stuck his tongue in a power outlet - has to be the most entertaining politician I've ever seen: his foot constantly stuck in his mouth, his brilliant-if-diction-challenged mind, his frazzled but devastating sense of humor, his cantankerous reactionary proclivities and his constant, slightly deranged gaffes improbably adding up to an enormously likable figure.

Why should you care? Because Boris has made a stump speech attack line out of Ken Livingston's fuel-for-advice deal with Juan Barreto's Greater Caracas Municipality, calling the effective subsidization of the world's wealthiest city's transport by a third world country "crackers" (a Britishism meaning "nuts" that, if pronounced Britishly enough, sounds just like "Caracas"- and a play on words that Mario Silva once hilariously misheard as "crack ass".)

The polls have these two neck-and-neck, so keep your fingers crossed for Boris tomorrow night. Just watching that Paleoleftist Livingstone booted out of office would be worth it.

The Supreme Tribunal's decision putting the final nail in the coffin of Enrique Mendoza and Leopoldo López's aspirations wasn't much of a surprise. Disqualifying opponents you don't think you can beat at the polls is just the kind of Ahmadinejadesque/Putinian tactic chavismo has shown itself increasingly comfortable with. More surprising, though, is the kamikaze move to throw some of chavismo best prospects on the pyre of presidential vanity.

Yesterday, PSUV idiotically gave the opposition a fighting chance in Lara and Barinas - two governor's races that should've been chavista shoe-ins - by expelling their most promising candidates there. When they threw their hats into their respective rinks without permission, Wilmer Azuaje and Henri Falcón committed the gravest of chavista sins: contravening a direct, public order from the big chief. From that moment, expulsion from the party was a foregone conclusion.

Due process? Chance to put up a defense? Whatchootalkin' about, Willis? I mean, sure, they're autonomous, but jefe es jefe.

Truth is, Barinas politics is something of an enigma: the most chavista of chavista states is one where everybody hates the Chávez Clan. If, as expected, Azuaje runs for governor on a minor party ticket, the chavista vote could split, imaginably making an opening for the opposition. It would be bizarre to have an oppo state government in this reddest of red states, but it's also clear that many loyal supporters of the president would balk at supporting another Chávez Clandidate.

But is enough of the old AD machine still operative to make a move here?

"It doesn't take much to understand the challenge that we now face. Many feel strong, feel invincible, feel they have the exclusive right to decide for others. That's the haughtiness that's so damaging to serious and honest politics...those who lack real leadership turn to intrigues, to rumors and to dirty tricks to try to climb a hill that gets ever steeper because they don't have the capacity to look after the people's needs."

It sure looks to me like he's referring to some local rival specifically, but knowing next to nothing about Lara politics, I can't tell who's hiding between the lines here. Can you?

One way or another, Katy tells me Falcón is a popular figure in Barquisimeto: one with real potential to split the pro-Chávez vote. If nothing else, he seems to be a pragmatist, which is a no-no within chavismo these days but a popular stance with regular folks more concerned with solutions than abstractions. And Lara is a more demographically promising state for the opposition: Barquisimeto is still the country's fourth city, and we always do better in urban areas.

It's all a bit of a reversal, this. It used to be the opposition that moronically purged itself from key state institutions (PDVSA, the Army, the National Assembly) leaving the way open for a chavista takeover. Maybe it's catching; now chavismo is doing it.

In a strange way, we've really got a good thing going here: the longer Chávez takes to make up his finger mind, the more chavista rising stars will be tempted to play off side and end up getting purged, giving us a shot to run against a divided government. And the Contraloría disqualifications, while they have certainly taken down some wheat, have washed out a lot of chaff too. It's early days, of course...but if you ask me, it's not looking too bad.

Update: A reader from Lara State helps round out the story:

[Luis] Reyes Reyes [the current chavista governor of Lara, who can't stand for re-election due to term limits] is in Chavez's inner circle. He took part in the 92 coup. Also they are compadres. His son, Jonas Reyes, is the president of the State Legislature, whose functions include overseeing the governor's administration. The governor has sabotaged almost every big initiative of Falcón. For example he took charge of his two biggest projects: transbarca (trolley bus) and the bus terminal. After he took away those projects claiming that he and central goverment were going to finish them, they were brought to a halt. Also Reyes Reyes's son promotes land squatting with the approval of his dad. Falcón has clearly stated his position against squatting. I think Falcón is a good mayor even though he faces some corruption allegations. Many people here in the Lara oppo were waiting for him to defect from Chavismo to vote for him.

April 29, 2008

Katy says: When Chávez first came to power, one of the things he asked to include in the Constitution was the concept of "food security." The country's ability to produce its own food was viewed, according to Article 305 of the Constitution, as "fundamental for the Nation's social and economic development."

After nine years and countless laws, policies and actions related to the ownership of land and the production of food, has the government delivered on this front?

A new paper by Ataman Aksoy and Francis Ng from the World Bank addresses this question, albeit indirectly. They set out to answer the question of which countries are net importers of food and which are net exporters.

The authors explore the many methodological issues involved in an international comparison of this sort, and questions like what constitutes food imports are addressed. More importantly, they track each country's net food trade balance over time, and compare it to their total imports.

Table 3 is the most interesting one. The findings for Venezuela confirm what we all know: during the Chávez years we have become more dependent on foreign food, not less. The following graph tracks net food imports (the difference between food exports and food imports) as a percentage of the country's total imports. It tells a clear story: an increasing percentage of the stuff we import is food.

And that's without including whiskey in "food imports".

During the same period, Latin American countries that were running a deficit like Bolivia decreased the weight of their deficit on their trade balance, and countries that have food surpluses (like Brazil) showed significant improvements.

We don't even have oil exports as an excuse. During the same period, Saudi Arabia's net food imports went from 6.5% of total imports to 6.1%; the UAE's went from 3.0% to 1.3% and neighboring Trinidad and Tobago went from 6.4% to 2.8%. These results are confirmed if you look at an alternative definition of net food imports, such as the one used in Table 4.

April 27, 2008

Quico says: Thinking about the way the New Political Class has looted the proceeds from our current oil boom, it's hard to contain a certain moralistic rage. We see the extravagant lifestyles that the people at the very top of the petrostate game enjoy and, understandably, flip out. But I wonder if that doesn't obscure the more widespread reality of Bolibourgeois corruption, the way rent-seeking works as a livelihood strategy for thousands of Venezuelan families beset by economic insecurity. I'm sure if you bracket the top beneficiaries in the graft histogram and focus on the long tail instead, what you see is not so much rampant greed as a rational response to a given set of incentives.

The culprit here is economic insecurity. The Venezuelan middle class has never shaken the sense of precariousness Viernes Negro brought. With few exceptions, honest middle class professionals can't earn enough to sustain a stable, middle-class lifestyle. Typical salaries just will not cover the rent and the car payments and the supermarket bill and the DirecTV bill and the school fees and the occassional dinner-and-a-movie and the phone bill and...

These are not extravagant aspirations: just the basics any junior teacher might expect in a first world country. Most college-educated Venezuelans aspire to that lifestyle, but simply can't afford it.Nor does their future look secure. With pension provision spotty, mortgages out of reach and savings facing negative real interest rates, Venezuelan professionals really don't have a lot of good options for securing a future for their families in the legal economy. The reality, for those aspiring to a middle class lifestyle, is that the "legit" route is a dead end.

The alternative is obvious: whether it's in the private sector (as, say, a Cadivi arbitrageur) or the public sector (as a corrupt official), you need a slice of the petrodollar pie. Given the low barriers to entry into the rent-seeking game, the low risk of detection, and the ubiquity of this kind of behavior, it's easy to see why the country's on course to a kind of Nash Equilibrium where everybody with half a chance is on the take. Where following the rules is for chumps, only chumps follow the rules.

Venezuelans have no time for the slow, patient build-up of mortgage equity and retirement savings you see in better-regulated societies: you don't really know how long your rent-grabbing opportunity will last, so basic caution dictates that when you see one, you take it. This may be your one chance to ensure yourself against the kind of hardship you've suffered in the past, your one go at differentiating yourself from all the economically insecure people all around you.

It's now or never. So your dominant strategy is to grab as much as you can as fast as you can. The few who manage to maneuver themselves into a position to grab a lot, grab a lot. The many who get into a position that allows them to grab only a little, grab only a little. But, in the end, everyone's grabbing as much as possible: when the chips are down, few Venezuelans will forgo the possibility to grab "their" share of the oil rents.

I'm no different: I'm typing this post on a computer Cadivi dollars bought. It may be a vanilla, by-the-book variant on rent-seeking, but rent-seeking it is.

There's an interesting contrast to be drawn here with the old Eastern Block. A good friend of mine from Hungary recalls growing up in an apolitical family in the 1980s. "We called it Sausage Socialism," she says. "As long as you kept your nose out of politics, you could be sure you'd always have a house, a job, and a nice sausage at the end of the day." Was there a small elite of very rich apparatchiks at the very top of Hungary's communist hierarchy? Of course! But was corruption a generalized practice, a widespread livelihood strategy? It really wasn't, because people didn't have this pervasive sense of economic insecurity. Sausage socialism made petty corruption not worth the risk.

Chavismo has failed to produce anything like the social safety net the old Eastern Block countries had. With economic insecurity rampant and rent-seeking opportunities plentiful, corruption comes to be seen less as a moral outrage and more as just "doing what's right by your family."

The cumulative outcome of all this is that long-tailed distribution: with a few very successful rent-seekers accumulating vast fortunes and a much greater number of small-timers trying to use the system not to get fantastically rich but just to ensure they can live the kind of stable middle class lifestyle they'd once thought their university degrees would guarantee them.

Beyond them, you'll find a bigger group of highly precarious aspiring middle class people who have no viable strategy for appropriating state rents, and then a huge mass of poor people entirely shut out of the system and squabbling over the crumbs that fall off of the petrostate banquet table, (mostly around election time, in the form of Misiones and other mass-based petro-rent handouts.)

Ressentment simmers within both groups. They'll tell you their anger is over the prevalence of corruption, but really what makes them mad is that they're out of the loop. They just don't have the connections it takes to really cash out. Because, in the petrostate game, it's the quantity and quality of your contacts with the petrostate elite that will determine where on that histogram you fall.

So long as the macroeconomy goes well and the oil boom keeps enough cash circulating, their exclusion from the baksheesh circuit will produce mostly latent discontent. But if there's one thing Venezuelan history shows conclusively it's that when the economy starts to sputter, the anger the Society of Accomplices generates becomes volcanic.